Wednesday, July 12, 2006

Why piracy is everyone’s problem

MALAYSIA is making its mark in the global entertainment industry. You can see it from the number of locally-made movies that have won or are contesting for international accolades – Puteri Gunung Ledang, Sepet, The Beautiful Washing Machine and Sanctuary, to name a few. It is clear that a rising tide of creative talent is giving the Malaysian entertainment industry a much-needed boost. But will it survive and continue to flourish?

This will very much depend on how well we fend off the menace of intellectual property (IP) pirates, because failure to do so may spell the end of this renaissance of creativity in Malaysia. The threat of piracy seems to grow greater by the day. Just walk into any pasar malam and witness the large number of makeshift stores selling illegal copies of songs, movies and software. In addition, there is the new frontier – cyberpiracy. With broadband Internet connectivity so prevalent and accessible these days, anyone can easily download – for free – almost any movie or song.

It is a problem that takes millions of ringgit away from musicians, actors, directors, producers and the rest of the entertainment industry that supports these people. Naturally, it warrants greater attention from those working in the industry to make the local entertainment industry successful.It is also an almost identical issue that costs another creative industry – the software industry – far more every year.

While major international software companies bear the brunt of piracy losses in the country, the phenomenon also acts as a disincentive for the development of homegrown software companies.Piracy is pulling the plug on a potentially lucrative local software industry. Aspiring software companies fight a losing battle when their software creations get ripped off and sold for RM10.I say this from personal experience – a friend of mine invested five years into creating a software package, only to have it pirated and sold off cheaply. The irony is that his software was pirated precisely because it was so good; pirates don’t usually pirate lousy software. Disheartened, this friend is no longer in the software business.

Despite efforts by software makers and law enforcement officials to stem software piracy, an estimated 63% of all software used in Malaysia in 2003 was pirated, according to the latest survey by the Business Software Alliance (BSA) and IT research firm IDC. Software piracy comes in many forms but no matter how it’s done, pirating software is no different from taking a CD from a music store without paying, or stealing a car – it is theft and it’s wrong.

Software companies, like Autodesk Asia Pacific where I work, commit both large amounts of capital and immense creative energy to improve their products and bring innovative software to market. In fiscal year 2004, our investment in R&D was more than RM794.2mil, which is almost a quarter of our revenues. That’s the typical amount of investment for a major software company in R&D. A quick check of a few software companies listed in Mesdaq within the last two years shows that these companies allocated up to 48% of proceeds from their public issues as funds for R&D. The recording industry loses some RM16bil worldwide every year, according to the Recording Industry Association of America. That’s a small loss compared with the RM110bil in global losses for software piracy in 2003. Losses in Malaysia due to software piracy came up to about RM490mil.

Those numbers don’t tell the entire story. Every ringgit lost represents theft from the local economies where software products are made and sold. Not only do governments lose sales and corporate taxes, but piracy costs jobs – those of software company workers and the jobs created when those workers spend money. The perpetrators of IP piracy may also be involved in other unsavoury elements of our society, and buying their products supports their activities. That’s why software piracy is taken so seriously under Malaysian law, which provides for fines of up to RM20,000 for each unlicensed software copy, or up to five years in prison, or both.

Like music piracy, a great deal of software piracy stems, not from wholesale counterfeiting, but from individuals who are either ignorant of the rules, or who choose to ignore them. At Autodesk, for example, about 80% of our piracy losses are due to people at small- and medium-sized businesses who simply make more copies of our programs than they’ve paid for. Perhaps these individuals don’t understand that software is sold with a licence that spells out how many copies can be made legally. Perhaps they think that an illegal copy or two won’t make a difference to a software company’s business.

But we estimate that for every copy of our programs sold legally, there are three to five illegal copies in use. That’s not an insignificant issue; that’s a major loss. And we’re only one software company out of thousands that suffer these types of losses. Our company, along with others in the industry, is trying its best to deal with this issue via efforts ranging from educational campaigns to working with BSA and law enforcement agencies. Legal action is a last resort taken only when illegal users refuse to comply with licensing regulations. But the most important weapon in the fight is education. Many software companies offer free toolkits, information and other resources to help people comply with their software licences. Like the music industry, the software industry is very important to Malaysia, and depends on the creative work of thousands of people.

Piracy saps that creativity. Wiping it out should be the responsibility of every individual.